Court File No. CV-12-9656-OOCL SUPERIOR COURT OF JUSTICE COMMERCIAL LIST

Court File No. CV-12-9656-OOCL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PCAS PATIENT CARE AUTOMATION SERVICES INC.
AND 2163279 ONTARIO INC. (the "Applicants")
APPLICATION UNDER THE COMPANIES' CREDITORS ARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
MOTION RECORD
(returnable May 7, 2012)
Date: May 7, 2012
AIRD & BERLIS LLP
Barristers & Solicitors
Brookfield Place
181 Bay Street, Suite 1800
Toronto, ON M5J 2T9
Sam Babe (LSUC # 49498B)
Tel: 416.865.7718
Fax: 416.863.1515
Email: sbabe(a2airdberlis.com
Ian Aversa (LSUC # 55449N)
Tel: 416.865.3082
Fax: 416.863.1515
Email: iaversa(a1airdberlis.com
Lawyers for the Applicants
SERVICE LIST
(current as ofApril 16, 2012)
TO:
PRICEWATERHOUSECOOPERS INC.
PwC Tower
18 York Street, Suite 2600
Toronto, ON M5J OB2
Attention: Paul van Eyk I Tracey Weaver
Tel: (416) 687-8101
Fax: (416) 814-3210
Email: paul.vaneyca.pwc.com / tracey.weaver(a~ ca.pwc.com
Monitor
AND TO: OSLER, HOSKIN & HARCOURT LLP
1 First Canadian Place
100 King Street West, Suite 6100
Toronto, ON M5X 1B8
Attention: Marc Wasserman / Patrick Riesterer
Tel: (416) 862-4908 / (416) 862-5947
Fax: (416) 862-6666
Email: mwasserman(.&osler.com / priesterer a osler.com
Lawyers for the Monitor
AND TO: GOODMANS LLP
Bay Adelaide Centre
333 Bay Street, Suite 3400
Toronto, ON M5H 2S7
Attention: Derek Bulas
Tel: (416) 597-5914
Fax: (416) 979.1234
Email: dbulasood.mans.ca
Lawyers for Casican Investments Inc.
-2AND TO: MINDEN GROSS LLP
145 King Street West, Suite 2200
Toronto, ON M5H 4G2
Attention: Kenneth Kallish / Raymond Slattery
Tel: (416) 369-4124 / (416) 369-4149
Fax: (416) 864-9923
Email: ldcallish(Z mindengross.com / rslattery a mindengross.com
Lawyers for Royal Bank of Canada
AND TO:
GRUNDY, CASS & CAMPBELL
PROFESSIONAL CORPORATION
Toronto-Dominion Centre
100 Wellington Street West, Suite 3150
Toronto, ON M5K 1A1
Attention: Douglas Grundy
Tel: (416) 849-8003
Fax: (416) 849-8004
Email: drundy c rundyeass.com
Lawyers for 2320714 Ontario Inc.
AND TO:
THORNTON GROUT FINNIGAN LLP
Suite 3200, 100 Wellington Street West
P.O. Box 329, Toronto-Dominion Centre
Toronto, ON M5K 1K7
Attention: Robert Thornton / Alana Shepherd
Tel: (416) 304-0560 / (416) 304-0597
Fax: (416) 304-1313
Email: rthorntonni tgf.ca / ashe herd ;igLea
Lawyers for 2320714 Ontario Inc.
AND TO: MINDEN GROSS LLP
145 King Street West, Suite 2200
Toronto, ON M5H 4G2
Attention: Timothy Dunn
Tel: (416) 369-4335
Fax: (416) 864-9223
Email: tdunn(2I mindengross.com
Lawyers for 2725312 Canada Inc.
AND TO: CAVALLUZZO HAYES SHILTON
MCINTYRE & CORNISH LLP
474 Bathurst Street, Suite 300
Toronto, ON MST 2S6
Attention: Michael D. Wright
Tel: (416) 964-5513
Fax: (416) 964-5895
Email: mwright a cavalluzzo.com
Lawyers for Ken Smith
12122303.3
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Court File No. CV-12-9656-OOCL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PCAS PATIENT CARE AUTOMATION SERVICES INC.
AND 2163279 ONTARIO INC. (the "Applicants")
APPLICATION UNDER THE COMPANIES' CREDITORS ARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
i
Notice of Motion
1
Draft Order
2
Affidavit of Loreto Grimaldi sworn May 7, 2012
3
Exhibit "A" — Updated Cash Flow Projections
A
Exhibit `B" — DIP Lender Letter
B
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Court File No. CV-12-9656-OOCL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PCAS PATIENT CARE AUTOMATION SERVICES INC.
AND 2163279 ONTARIO INC. (the "Applicants")
APPLICATION UNDER THE COMPANIES' CREDITORSARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
NOTICE OF MOTION
(returnable May 7, 2012)
PCAS Patient Care Automation Services Inc. ("PCAS") and 2163279 Ontario Inc., doing
business as Touchpoint ("Touchpoint" and, together with PCAS, the "Applicants") will make a
motion to the Honourable Mr. Justice Brown on May 7, 2012 at 5:45 p.m. or as soon after that
time as the motion can be heard, at 330 University Avenue, Toronto, Ontario.
PROPOSED METHOD OF HEARING: The motion is to be heard orally.
1.
THE MOTION IS FOR an Order, among other things:
(a)
abridging the time for service and filing of this notice of motion and the motion
record and dispensing with further service thereof;
(b)
approving the Fourth Report of PricewaterhouseCoopers Inc. ("PwC"), in its
capacity as the Court-appointed monitor of the Applicants (in such capacity, the
"Monitor") dated May 7, 2012 (the "Fourth Report") and approving the actions
of the Monitor described therein;
2
(c)
extending the Stay Period (as defined in the Initial Order of the Honourable Mr.
Justice Morawetz granted on March 23, 2012 in these proceedings (the "Initial
Order")) to May 28, 2012;
(d)
increasing the amount the Applicants are currently authorized to borrow under a
credit facility (the "DIP Facility") from 2320714 Ontario Inc. (the "DIP
Lender") from $4,525,000 to $6,000,000;
(e)
enhancing the Monitor's power to include the power to market the business,
assets, property and undertaking of the Applicants (the "Property"), and
approving the Monitor's retention of its affiliate, PricewaterhouseCoopers
Corporate Finance ("PWCF"), as its marketing agent;
(f)
approving a Second Amended and Restated DIP Loan Agreement (the "Second
Amended and Restated DIP Loan Agreement"); and
(g)
such further and other relief as counsel may advise and this Honourable Court
may permit.
2. THE GROUNDS FOR THE MOTION ARE:
(a)
on March 23, 2012, the Applicants made an application under the Companies'
Creditors Arrangement Act (the "CCAA") seeking court protection from their
creditors, which was granted pursuant to the Initial Order;
(b)
pursuant to paragraph 3 of the Order of the Honourable Justice Brown made May
3, 2012 (the "May 3 Order"), the Stay Period was extended to May 8, 2012;
(c)
the Applicants require an extension of the Stay Period to May 28, 2012 in order to
permit them to continue to take appropriate steps to maximize value for all of
their creditors, including, without limitation, conducting a sale process (the "Sale
Process");
3
(d)
the thirteen-week cash flow projection, produced in conjunction with the Monitor
and attached as Exhibit "A" to the Affidavit of Loreto Grimaldi, sworn May 7,
2012, projects that the Applicants presently have sufficient funding to continue
operating (including payment of all accrued wages) until May 28, 2012 and
(subject to Court approval) to conduct the Sale Process during that period;
(e)
based on the information available, creditors of the Applicants will not be
materially prejudiced by an extension of the Stay Period until May 28, 2012;
(f)
the Applicants have acted, and continue to act, in good faith and with due
diligence, and circumstances exist that make granting an extension of the Stay
Period appropriate;
(g)
pursuant to paragraph 31 of the Initial Order, as amended by the May 3 Order, the
Applicants were authorized and empowered to obtain and borrow under the DIP
Facility from the DIP Lender in order to finance the Applicants' working capital
requirements and other general corporate purposes and capital expenditures,
provided that borrowings under such credit facility did not exceed the principal
amount of $4,525,000 unless permitted by further Order of this Court;
(h)
the limit on the Applicants' authorized borrowing reflects the level of funding the
DIP Lender had available to lend under the DIP Facility as at May 3, 2012;
(i)
the Cash Flows and the Amended and Restated DIP Loan Agreement, as defined
in, and as approved by, the Order of the Honourable Justice Brown made April
16, 2012, both contemplate a DIP Facility as high as $10,000,000, should the DIP
Lender raise sufficient amounts to fund such facility;
(j)
the DIP Lender has advised that, since the date of the May 3 Order, it has received
commitments and/or funding sufficient to increase the DIP Facility by an
additional $825,000;
4
(k)
the DIP Lender has also requested that the authorized borrowing under the DIP
Facility be increased by an additional $600,000 to accommodate DIP Lender fees
and expenses payable in accordance with the terms of the DIP Facility;
(1)
the Applicants are therefore seeking to have their authorized borrowing under the
DIP Facility increased to $6,000,000 in the aggregate;
(m)
the Applicants will not be able to continue their operations or conduct the Sale
Process without an increase in the amount of the DIP Facility to $6,000,000;
(n)
increasing the amount of the DIP Facility to $6,000,000 is favourable to the
Applicants having regard to the circumstances and the increase in the amount of
the DIP Facility is necessary and reasonable in the circumstances to ensure that
the Applicants have a prudent and responsible level of liquidity so that they can
meet post-filing obligations as they become due for the period of the initial stay
and beyond;
(o)
enhancing the Monitor's power to market the Property, and approving the
retention of PWCF as agent, will allow the preliminary marketing to commence
pending approval of the Sale Process on subsequent return to Court;
(p)
the Monitor has filed with the Court its Fourth Report outlining, among others
things: (i) the actions of the Monitor since the date of the Third Report dated May
3, 2012; and (ii) the Applicants' financial situation;
(q)
the Monitor supports the relief being sought by the Applicants;
(r)
neither the Applicants nor the Monitor are aware of any objections to the
proposed relief sought herein;
(s)
the other grounds set out in the Fourth Report;
(t)
sections 11, 11.02 and 11.2 of the CCAA and the inherent and equitable
jurisdiction of this Honourable Court;
5
(u)
rules 1.04, 2.03, 3.02, 16.08 and 37 of the Rules of Civil Procedure, R.R.O. 1990,
Reg. 194, as amended; and
such further and other grounds as counsel may advise and this Honourable Court
(v)
may permit.
3.
THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the
motion:
(a)
the Affidavit of Loreto Grimaldi sworn May 7, 2012;
(b)
the Fourth Report; and
(c)
such further and other material as counsel may submit and this Honourable Court
may permit.
Date: May 7, 2012
AIRD & BERLIS LLP
Barristers & Solicitors
Brookfield Place
181 Bay Street, Suite 1800
Toronto, Ontario M5J 2T9
Sam Babe (LSUC # 49498B)
416.865.7718
Tel:
Fax: 416.863.1515
Email: [email protected]
Ian Aversa (LSUC # 55449N)
416.865.3082
Tel:
Fax: 416.863.1515
Email: iaversana) airdberlis.com
Lawyers for the Applicants
TO: ATTACHED SERVICE LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENTACT,
RS.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PCAS PATIENT CARE AUTOMATION SERVICES INC. AND 2163279 ONTARIO INC.
(the "Applicants")
Court File No. CV-12-9656-OOCL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceedings commenced at Toronto
NOTICE OF MOTION
(returnable May 7, 2012)
AIRD & BERLIS LLP
Barristers and Solicitors
Brookfield Place
181 Bay Street, Suite 1800
Toronto, Ontario M5J 2T9
Sam Babe (LSUC # 49498B)
Tel: 416.865.7718
Fax: 416.863.1515
Email: sbabeciairdber1is.com
Aversa (LSUC # 55449N)
Tel: 416.865.3082
Fax: 416.863.1515
Email: iaversa airdberlis.com
Ian
12393643.2
I
Lawyers for the Applicants
1
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Court File No. CV-12-9656-OOCL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE MR.
)
MONDAY, THE 7`h DAY
JUSTICE BROWN
)
OF MAY, 2012
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PCAS PATIENT CARE AUTOMATION SERVICES INC.
AND 2163279 ONTARIO INC. (the "Applicants")
APPLICATION UNDER THE COMPANIES' CREDITORSARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
I.1' "..
THIS MOTION, made by PCAS Patient Care Automation Services Inc. and 2163279
Ontario Inc., doing business as Touchpoint (collectively, the "Applicants"), for an order, inter
alia: (a) approving the Fourth Report of PricewaterhouseCoopers Inc. ("PwC"), in its capacity as
the Court-appointed monitor of the Applicants (in such capacity, the "Monitor") dated May 7,
2012, filed (the "Fourth Report"), and approving the actions of the Monitor described therein;
(b) extending the Stay Period (as defined in the Initial Order of the Honourable Mr. Justice
Morawetz granted on March 23, 2012 in these proceedings (the "Initial Order")) to May 28,
2012; (c) increasing the amount the Applicants are currently authorized to borrow render the
credit facility (the "DIP Facility") from 2320714 Ontario Inc. (the "DIP Lender") from
$4,525,000 to $6,000,000; (d) increasing the Monitor's powers to market the Applicants'
business; and (e) approving a Second Amended and Restated DIP Loan Agreement (the "Second
Amended and Restated DIP Loan Agreement"), was heard this day at 330 University Avenue,
Toronto, Ontario.
-2ON READING the affidavit of Loreto Grimaldi, sworn May 7, 2012 (the "May 7
Affidavit") and the exhibits thereto, filed, and the Fourth Report, filed, and on hearing the
submissions of counsel for the Applicants, counsel for the Monitor, counsel for the DIP Lender,
counsel for Castcan Investments Inc., counsel for Royal Bank of Canada
and no one appearing for any other person on the
service list, although duly served as appears from the affidavit of Susy Moniz sworn May 7,
2012, filed,
1.
THIS COURT ORDERS that the time for service and filing of the notice of motion and
the motion record is hereby abridged and validated so that this motion is properly returnable
today and hereby dispenses with further service thereof.
2.
THIS COURT ORDERS that the Fourth Report be and is hereby approved and the
actions of the Monitor described therein be and are hereby approved.
3.
THIS COURT ORDERS that the Stay Period, as defined in paragraph 13 of the Initial
Order, be and is hereby extended to and including May 28, 2012.
4.
THIS COURT ORDERS that paragraph 31 of the Initial Order be and is hereby
amended to provide as follows:
31.
THIS COURT ORDERS that the Applicants are hereby authorized and
empowered to obtain and borrow under a credit facility from 2320714 Ontario Inc. (the
"DIP Lender") in order to finance the Applicants' working capital requirements and other
general corporate purposes and capital expenditures, provided that borrowings under such
credit facility shall not exceed the principal amount of $6,000,000 unless permitted by
further Order of this Court.
5.
THIS COURT ORDERS that the Monitor's powers pursuant to paragraph 23 of the
Initial Order are hereby expanded to include the power to market any or all of the Property (as
defined in the Initial Order), including advertising and soliciting offers in respect of the Property
or any part or parts thereof and negotiating such terms and conditions of sale as the Monitor in its
discretion may deem appropriate.
-36.
THIS COURT ORDERS that the Monitor is hereby authorized and directed, pursuant to
its powers under paragraph 23(i) of the Initial Order, to retain PricewaterhouseCoopers
Corporate Finance as its agent to market the Property, on terms to be approved by further Order
of this Court.
7.
THIS COURT ORDERS that the credit facility described in paragraph 31 of the Initial
Order shall be on the terms and subject to the conditions set forth in the form of Second
Amended and Restated DIP Loan Agreement appended as Exhibit `B" to the Affidavit of Loreto
Grimaldi sworn May 3, 2012 (the "May 3 Affidavit"), filed.
8.
THIS COURT ORDERS that the Applicants are hereby authorized and empowered to
execute and deliver the Second Amended and Restated DIP Loan Agreement in substantially the
form appended to the May 3 Affidavit, and such other credit agreements, mortgages, charges,
hypothecs and security documents, guarantees and other definitive documents (collectively, the
"Definitive Documents"), as are contemplated by the Second Amended and Restated DIP Loan
Agreement or as may be reasonably required by the DIP Lender pursuant to the terms thereof,
and the Applicants are hereby authorized and directed to pay and perform all of their
indebtedness, interest, fees, liabilities and obligations to the DIP Lender under and pursuant to
the Second Amended and Restated Loan Agreement and the Definitive Documents as and when
the same become due and are to be performed, notwithstanding any other provision of this Order.
9.
THIS COURT ORDERS that any interested party (including the Applicants and the
Monitor) may bring a motion to this Court to vary or amend this Order (provided that the
beneficiary of any Charge shall be entitled to rely on the Charges up to and including the day on
which such Charge or the priority granted to such Charge may be varied or amended), which
motion must be returnable by no later than May 14, 2012 or such later date as the parties affected
may agree, on not less than three (3) days' notice to any other party or parties likely to be
affected by the order sought or upon such other notice, if any, as this Court may order.
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PCAS PATIENT CARE AUTOMATION SERVICES INC. AND 2163279 ONTARIO INC.
(the "Applicants")
Court Pile No. CV-12-9656-OOCL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceedings commenced at Toronto
i ti 1
AIRD & BERLIS LLP
Barristers and Solicitors
Brookfield Place
181 Bay Street, Suite 1800
Toronto, Ontario M5J 2T9
Sam Babe (LSUC # 49498B)
Tel: 416.865.7718
Fax: 416.863.1515
Email: sbabe(alairdberlis.com
Ian Aversa (LSUC # 55449N)
Tel: 416.865.3082
Fax: 416.863.1515
Email: iaversa(2airdberlis.com
Lawyers for the Applicants
1 ~
Court File No. CV-12-9656-OOCL
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PCAS PATIENT CARE AUTOMATION SERVICES INC.
AND 2163279 ONTARIO INC. (the "Applicants")
APPLICATION UNDER THE COMPANIES' CREDITORSARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
AFFIDAVIT OF LORETO GRIMALDI
(sworn May 7, 2012)
I, LORETO GRIMALDI, of the City of Vaughan, in the Province of Ontario, MAKE
OATH AND SAY AS FOLLOWS:
1.
I am the Chief Legal Officer, General Counsel and Secretary of PCAS Patient Care
Automation Services Inc. ("PCAS"). I am also the Secretary of 2163279 Ontario Inc., doing
business as Touchpoint ("Touchpoint"), a company 49% owned by PCAS. As such, I have
personal knowledge of the matters to which I hereinafter depose in this Affidavit. Where I do
not have personal knowledge of the matters set out herein, I have stated the source of my
information and, in all such cases, believe it to be true.
2.
This Affidavit is sworn in support of a motion (the "Motion") by PCAS and Touchpoint
(collectively, the "Applicants") for an order, among other things:
(a)
approving the Fourth Report (the "Fourth Report") of PricewaterhouseCoopers
Inc. ("PwC"), in its capacity as the Court-appointed monitor of the Applicants (in
such capacity, the "Monitor") and approving the actions of the Monitor described
therein;
Affidavit of Loreto Grimaldi
Page 2
(b)
extending the Stay Period (as defined in the Initial Order of the Honourable Mr.
Justice Morawetz granted on March 23, 2012 in these proceedings (the "Initial
Order")) to May 28, 2012;
(c)
increasing the amount the Applicants are currently authorized to borrow under a
credit facility (the "DIP Facility") from 2320714 Ontario Inc. (the "DIP
Lender") from $4,525,00010 $6,000,000; and
(d)
enhancing the Monitor's power to include the power to market the business,
assets, property and undertaking of the Applicants (the "Property").
BACKGROUND
3.
On March 23, 201.2, the Applicants made an application under the Companies' Creditors
Arrangement Act, K.S.C. 1985, c. C-36, as amended (the "CCAA") seeking court protection
from their creditors, which was granted pursuant to the Initial Order.
4.
Pursuant to the Initial Order, PricewaterhouseCoopers Inc. was appointed as CCAA
Monitor (the "Monitor").
THE STAY PERIOD
5.
Pursuant to paragraph 3 of the Order of the Honourable Justice Brown made May 3, 2012
(the "May 3 Order"), the Stay Period was extended to May 8, 2012;
6.
An extension of the Stay Period until May 28, 2012 is necessary in order to provide
stability to the Applicants' business while the Applicants, with the assistance of the Monitor and
PWCF, and subject to future approval of the Court, conduct the abbreviated sale process describe
in paragraph 1.8 below (the "Sale Process").
7.
The Applicants' thirteen-week cash flow projections produced in conjunction with the
Monitor (The "Cash Flows") project that the Applicants have sufficient funding to continue
operating (including payment of all accrued wages) until May 28, 2012, and to conduct the Sale
Process during that period, hi order to achieve this, PCAS is laying-off ninety-eight employees,
Affidavit of Loreto Grimaldi
Page 3
reducing their payroll to forty-two. A copy the Cash Flows is attached as Exhibit "A" to this
Affidavit.
8.
The Monitor has indicated that it supports an extension of the Stay Period until May 28,
2012. 1 do not believe that any creditor of the Applicants will suffer any material prejudice if the
Stay Period is extended until May 28, 2012.
9.
Since the issuance of the Initial Order, the Applicants have acted, and continue to act, in
good faith and with due diligence.
THE DIP FACILITY AND FINANCIAL SITUATION OF THE APPLICANTS
10.
Pursuant to paragraph 31 of the Initial Order, as amended by the May 3 Order, the
Applicants were authorized and empowered to obtain and borrow under the DIP Facility from
the DIP Lender in order to finance the Applicants' working capital requirements and other
general corporate purposes and capital expenditures, provided that borrowings under such credit
facility did not exceed the principal amount of $4,525,000 unless permitted by further Order of
this Court.
11.
Pursuant to paragraph 5 of the Order of the Honourable Justice Brown made April 16,
2012, the DIP Facility is to be on the terms and subject to the conditions set forth in the
Amended and Restated DIP Loan Agreement between the Applicants and the DIP Lender (the
"DIP Loan Agreement"). The Cash Flows and the Amended and Restated DIP Loan
Agreement both contemplate a DIP Facility as high as $10,000,000, should the DIP Lender raise
sufficient amounts to fund such facility.
12.
In my affidavit sworn May 3, 2012, I described how the DIP Lender had advised that it
had a firm, but conditional commitment from a strategic financier for an additional $3,000,000 in
funding for the DIP Facility and that the most significant hurdle among the conditions to this
new financing was that the DIP Lender had to have an additional $1,000,000 available to commit
to the DIP Facility. As at May 3, 2012, the Applicants were hopeful that the additional
$1,000,000 commitment to the DIP Lender could be obtained from one or more of a number of
other parties who had made less firm commitments ranging from $500,000 to $4,950,000, and
that that could be done prior to May 8. The $4,000,000 raised under this scenario would. have
Affidavit of Loreto Grimaldi
Page 4
been used to fund a sale and investor solicitation process that would have taken place over the
next six weeks.
13.
On the morning of Friday May 4, 2012, PCAS and the DIP Lender appeared to be
reaching a compromise with the strategic financier to allow the $3,000,000 to be advanced in
increments as the additional $1,000,000 was raised. That afternoon, however, the strategic
financier withdrew its offer completely, apparently after receiving a telephone call from a
potential bidder for the business of the applicants.
14.
The DIP Lender has advised that, since the date of the May 3 Order, it has received
commitments and/or funding sufficient to increase the DIP Facility by $825,000. The DIP
Lender and its counsel have also incurred fees and expenses, payable by PCAS under the terms
of the DIP Facility. In order to account for DIP Lender fees and expenses both to-date and
expected, the DIP Lender has requested that the authorized borrowing under the DIP Facility be
increased by an additional $650,000. The Applicants are therefore seeking to have their
authorized borrowing under the DIP Facility increased to $6,000,000 in the aggregate.
15.
I believe that the Applicants will not be able to conduct the Sale Process without an
increase in the amount of the DIP Facility to $6,000,000.
16.
I believe that increasing the amount of the DIP Facility to $6,000,000 is favourable to the
Applicants having regard to the circumstances and the increase in the amount of the.DIP Facility
is necessary and reasonable in the circumstances to ensure that the Applicants have a prudent and
responsible level of liquidity so that they can meet post-filing obligations as they become due for
the current Stay Period and beyond.
SALE PROCESS
17.
The Applicants, the Monitor and the DIP Lender all agree that a sale process should be
initiated as soon as possible with what limited funding is available under the DIP Facility. Given
the Applicants' very limited liquidity, a sale is the best, and likely the only, means to preserve
the Applicants' business as a going concern. Preservation of the business would mean, among
other things, the preservation (and even revival) of hundreds of valuable technology jobs.
Affidavit of Loreto Grimaldi
Page 5
18.
The Sale Process contemplated by the Applicants would, because of the limited funding
available under the DIP Facility, have to be run over a period not longer than three weeks. It is
intended that the Monitor would run the process using its affiliate, PricewaterhouseCoopers
Corporate Finance ("PWCF"), as its agent, and would recommend a resulting transaction to the
Applicants. The Applicants believe the three-week Sale Process will achieve the same degree of
market exposure for the Property as would a longer process because there has already been very
extensive marketing through: (a) two private placements that were conducted (unsuccessfully)
both domestically and internationally at the beginning of this year by three investment banks; (b)
the DIP Lender's broad efforts to market the opportunity to invest in the DIP Facility, both as an
opportunity for return on investments as well as a strategic step to an eventual bid for the
Property; (c) the access that nineteen separate organizations have had to the Applicants'
confidential data room since the commencement of these CCAA proceedings; and (d)
preliminary discussions the Applicants and/or the Monitor have already had with potential
bidders.
19.
The Applicants intend to return to Court shortly to seek approval of the Sale Process, and,
in the meantime, the Monitor and PWCF will commence the formal marketing process under the
enhanced powers presently being sought
20.
The Applicants have struggled, ultimately unsuccessfully, to raise sufficient DIP
financing to fund a more fulsome sale and investor solicitation process (a "SISP"), as was
originally intended. The Applicants have received a letter from the DIP Lender stating, among
other things, that the DIP Lender does not believe it can raise the funding that would be required
to run the originally intended SISP (the "DIP Lender Letter"). A copy of the DIP Lender Letter
is attached as Exhibit "B" to this Affidavit
21.
The Applicants are not aware of any creditor that objects, or would have grounds to
object, to a sale of the business as a going concern in the present circumstances. A sale by the
Applicants will preserve more value than a sale by a receiver or a liquidation in bankruptcy.
22.
PWCF is a respected investment banker with a good knowledge of the Applicants
obtained through its work with the Monitor since the inception of these CCAA proceedings. The
Applicants believe that this knowledge and PWCF's ability to work closely with the Monitor
Affidavit of Loreto Grimaldi
Page 6
make PWCF the candidate most able to institute and run the Sale Process in the very short
thneframe required.
23.
PWCF previously supplied a quote for running a SISP, which quote was significantly
lower than the quotes obtained from several other investment banks for running the same
process. PWCF's fee structure for the Sale Process, as set out in its engagement letter, is in
proportion to the Sale Process as its prior quote was to the intended SISP. The Applicants are,
therefore, confident that PWCF's fee structure is reasonable and consistent with market practice.
24.
The Monitor has advised that it approves of the Sale Process and of the retention of
PWCF to conduct the Sale Process.
25.
This Affidavit is sworn in support of the relief requested by the Applicants and for no
other or improper purpose.
SWORN BEFORE ME at the City of
Vaughan, in the Province of Ontario,
this 7"' day of May, 2012.
c aJ "
onunissionur f oaths, etc.
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L
ET'O GRIMAL;.I
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Attached is Exhibit "A" Referred to in the
AFFIDAVIT OF LORETO GRIMALDI
Sworn before me this 7`s day of May, 2012
Commissioner for taking Affidavits, etc
DRAFT- FOR DISCUSSION PURPOSES ONLY
____
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Attached is Exhibit `B" Referred to in the
AFFIDAVIT OF LORETO GRIMALDI
Sworn before me this 7 th day of May, 2012
1~Jt2 G7 G1 61!—)
Commissioner for taking Affidavits, e(c
2320714 ONTARIO INC.
Suite 5850, 100 King Street West
Toronto, Ontario
May 7, 2012
PCAS Patient Care Automation Services Inc.
2- 2880 Brighton Road
Oakville, Ontario
L6H 5S3
Attention: Kym Anthony, Chairman
Dear Kym:
I am writing this letter in my capacity as the President of 2320714 Ontario Inc. (the "DIP
Lender"). The purpose of this letter to provide the Court with an understanding of the activities that
have been undertaken by the DIP Lender in support of the restructuring efforts of PCAS Patient Care
Automation Services Inc. ("PCAS") and 2163279 Ontario Inc. ("Touchpoint").
The DIP Lender was formed as vehicle through which those persons ("DIP Financiers") who were
interested in doing so could participate in the provision of the debtor-in-possession loan facility (the
"DIP Loan Facility") for the duration of the CCAA proceedings. DIP Financiers have made loans to the
DIP Lender in order to provide it with the funding required to make advances to PCAS under the DIP
Loan Facility. The advances made to PCAS under the DIP Loan Facility are secured by the Charge granted
by the Court. In turn, the DIP Lender has issued notes to the DIP Financiers and granted security to each
DIP Financier in the form of a general security agreement granting a security interest in all of the
undertaking, property and assets of the DIP Lender. The security interests granted to the DIP Financiers
are to rank on a pari passu basis pursuant to the terms of a Par! Passu Agreement that each DIP
Financier has agreed to sign.
My principal occupation is running a Family Office for private clients and their families. Prior to
becoming involved as the President of the DIP Lender, my involvement with PCAS was as a shareholder
of PCAS. Many of my clients were also shareholders of PCAS. I agreed to become the President of the
DIP Lender at your request as both you and I believed that it was important that the DIP Lender be
managed by a person who was not an officer or director of PCAS. While I am currently the sole
shareholder of the DIP Lender, holding the only issued and outstanding common share, I am holding
that share in trust for the DIP Financiers. As President of the DIP Lender, I felt that it was also important
that the DIP Lender obtain independent counsel to guide me through the CCAA proceedings. I have
therefore retained Doug Grundy of Grundy, Cass & Campbell Professional Corporation as corporate
counsel to the DIP Lender and Bob Thornton of Thornton Grout Finnigan LLP as insolvency and litigation
counsel to the DIP Lender.
I also agreed to take on the role of President of the DIP Lender because I believed that through a
restructuring process funded by the DIP Lender significant value could be realized by the shareholders of
PCAS through a refinancing or sale of the business. Initially, I felt that if the DIP Lender could provide
the funding necessary for a period of 13 or more weeks, parties would come forward with financing or a
transaction that would realize that value for shareholders. While, as discussed below, it has proven to
be more challenging than we initially hoped to raise the necessary funds to finance a restructuring
process, I continue to believe that the assets securing the DIP Loan Facility should have a sufficiently
high value to provide value to the existing PCAS shareholders and other stakeholders after paying out
the DIP Loan Facility. The purpose of the DIP Lender has never been to acquire the PCAS business for
the sole benefit of the DIP Financiers.
Since the commencement of the CCAA proceedings, PCAS and the DIP Lender have sought to
raise the funds necessary to fund a restructuring process. As the Court is aware, initially, it was believed
that the DIP Loan Facility should be $10 million in order to fund a 13-week restructuring process.
Members of the PCAS board, senior officers of PCAS and I, and our counsel, have approached over 30
financial and strategic investors trying to encourage them to participate in the DIP Loan Facility. As the
Court is aware, numerous communications have also been sent by PCAS to its shareholders encouraging
them to participate in the DIP Loan Facility. While we felt that the initial terms of the DIP Loan Facility
were sufficient to attract the necessary funds required by the DIP Lender to fully fund the DIP Loan
Facility, it soon became apparent from discussions with shareholders and other potential investors that
the terms were not adequate to attract the participation required. Accordingly, the DIP Lender
negotiated with PCAS enhancements to the terms of the DIP Loan Facility which were subsequently
approved by the Court. Even still, as the Court is aware, the DIP Lender has not yet been able to fund
the DIP Loan Facility to the extent originally envisaged. This has hampered the ability of PCAS to commit
to a full sale process, although throughout this process both PCAS and the DIP Lender have approached
and had discussions with several parties who have been interested in the PCAS business.
As the President of the DIP Lender, I have been actively involved daily in discussions with
potential DIP Financiers and potential bidders/investors in PCAS. This unforeseen level of activity has
exerted a toll upon me and adversely affected the time that I would normally would have had available
for my full time occupation. In acting as the President of the DIP Lender, I have not received a salary and
have not received a commission for any of the funds raised from DIP Financiers. However, I have
provided extensive consulting services in my professional capacity to the DIP Lender. I have invoiced the
DIP Lender for those services at rate discounted from my usual hourly rate and have contributed those
fees to the DIP Loan Facility. The DIP Lender's counsel, Grundy, Cass & Campbell and Thornton Grout
Finnigan, have made the same arrangement with the DIP Lender and have contributed their fees to the
DIP Loan Facility. The result of these arrangements is that the cash burn of PCAS has been reduced by
not having to fund these fees, resulting in a cash saving to date of approximately $400,000. The DIP
Charge should be increased accordingly to cover these advances.
Throughout the CCAA proceedings, the DIP Lender has been working closely with the PCAS
board. The DIP Lender continues to seek a restructuring transaction that will bring value to the creditors
and shareholders of PCAS. I continue to believe that a sale process will provide value to the creditors
and shareholders of PCAS. While it would appear that PCAS and the DIP Lender will be unable to raise
sufficient funds to fund the type of sale/restructuring process that was initially envisaged, I believe that
there are enough parties interested in the PCAS business and technology who have conducted due
diligence investigations over the past several weeks to justify a short sales process. The DIP Lender has
obtained all the funding from the DIP Financiers on the basis that such a process would be undertaken
and I believe that it is important that this promise be fulfilled.
However, the funds available through additional DIP Loans are limited. While this is not what
was originally contemplated, it will be necessary for PCAS to find a way to live within the available
funding and to cooperate with the Monitor and the DIP Lender to run a truncated process to achieve the
best result available in the circumstances, Details of exactly how much is available and what that means
for the continued operations of PCAS and the manner of process to be run are being developed as I
write this letter, all for presentation to, and hopefully approval of, the Court this afternoon.
We look forward to working closely with you through this process, to your continued future
cooperation in that process and to achieving as much success as can be achieved in these difficult
circumstances.
Yours truly,
2320714 ONTARIO INC.
s
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't-- ~ .✓
By:
George Swan, President
IN THE MATTER OF THE COMPANIES' CREDITORSARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PCAS PATIENT CARE AUTOMATION SERVICES INC. AND 2163279 ONTARIO INC.
(the "Applicants")
Court File No. CV-12-9656-OOCL
Proceedings commenced at Toronto
AFFIDAVIT OF LORETO GRIMALDI
(sworn May 7, 2012)
AIRD & BERLIS LLP
Barristers and Solicitors
Brookfield Place
181 Bay Street, Suite 1800
Toronto, Ontario M5J 2T9
Sam Babe (LSUC # 49498B)
Tel: 416.865.7718
Fax: 416.863.1515
Email: [email protected]
Ian Aversa (LSUC # 55449N)
Tel: 416.865.3082
Fax: 416.863.1515
Email: [email protected]
Lawyers for the Applicants
12393644.2
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENTACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT
OF PCAS PATIENT CARE AUTOMATION SERVICES INC. AND 2163279 ONTARIO INC.
Court File No. CV-12-9656-OOCL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceeding commenced at Toronto
MOTION RECORD
(returnable May 7, 2012)
AIRD & BERLIS LLP
Barristers and Solicitors
Brookfield Place
181 Bay Street, Suite 1800
Toronto, Ontario M5J 2T9
Sam Babe (LS(JC # 49498B)
Tel: 416.865.7718
Fax: 416.863.1515
Email: sbabe airdberlis.com
Ian Aversa (LSUC # 55449N)
Tel: 416.865.3082
Fax: 416.863.1515
Email: iaveisaaairdberlis.com
Lawyers for the Applicants
12393642.1